Skip this bullet if you do not want to read my ranting. MPM is not something I usually read, as I consider it a bit triteful. It is usually full of old-style "cultural" essays, it feels like going back to the Ming Dynasty - a coincidence to how the magazine is named. In addition, it features a column by Cathay Pacific CEO Philip Chen, dedicated to promoting the monopoly of his company. Not that I do not like Cathay, I think it provides the top notch service and would like Cathay to take overall all airlines in the world. But I am also extreme wary of monopoly, and in particular, why one would use a column in a 'serious' magazine for propaganda.

The feature topic of this month (May) is about China's peaceful development. As an example of the unfortunate outdatedness of the editor, it still sticks to the long abandoned phrase of "peaceful rise" and a lot of the comments and essays inside mostly directed criticism to this something that China's leader has trashed and replaced with 'development' more than a year ago.

It is difficult to translate the word "epic" (時代) that He and Zhao refers to. It literally it means time, epic or era, with the connotation of the background, atmosphere and trend during the particular era. This is how they started, the international environment from 1950-2000.

Apparently, the concept of peaceful development is initially for internal digestion, rather than for PR purpose. Chinese ideologues (and to a certain extent some strategists) were still debating on whether a major war is inevitable throughout the period. This is how the concept of peaceful development come in, it argue for the case that the world is no longer at war and we need to focus on development, and to trust and help building a peaceful environment. It sounds a bit pervert that people in Beijing still thinks there would be war with the "imperialists". But if you understand the background of why the world's most capitalistic economy was called "socialism with Chinese chacteristics" you would probably understand why the Chinese leader needed to go throught that debate in 1990s.

Historically, CCP always believed that there would be inevitable clash (and hence war) with Western imperialists. (imperialists = capitalists = OECD for these ideologues). This is a corollary of Marxist/Leninist theory (He mentioned the debate between Lenin and Karl Kautsky, where Kautsky argued there could be a case that Communists and Imperialists can co-exisst together without going to war), and held on by USSR in Stalin's era. When Krushev came to power he started to question this and began to prepare for detente. Disagreement on such belief is among the many reasons that led to the Sino-Soviet split.

Even in early 1980s, many in Beijing still believed that clash with imperialism (US and USSR) is inevitable. The best they can do is to defer it for 10-20 years. Such belief is still taken by a minority of scholars in China even of today.

When the world has been busily engaged in development, capturing the post-WWII period of peace. China was busy preparing itself for war, isolating itself (and, warring within itself). As a result of this misjudgment, PR China lost out big time for its first 30 years.

Deng was the first to question the inevitability school of thought. He fundamentally changed the view on war and peace, and based on this, argued we do not necessarily have to play US against USSR. (i.e. we could be at peace with both of them at the same time, and perhaps till the distant future as well). In addition, he proposed that the new game in the world is "peace" and "development".

In the interview He Fang discussed about: Westernization, humanism, colonialism and why decolonization is a natural result of the economic evolution in imperialism, evolution of how the world view war vs peace after WWII. He examined, from CCP's perspective, why it should (and had) believed that we now live in a world environment of peace and development (in order words, Barnett's Core)

Regarding history and Japan. HF's view is that we should look forward and be rational. We can remember history while seeking for friendship at the same time. He quoted his personaly experiences in his visits in Japan in the 1980s to show that Japanese people has mostly been friendly to China

It sounds quite trivial to many of us, that competition in modern world is about development and war is a lose-lose situation. However, it is another level of thinking for the paranoids, especially if they have been under threat for most of their lives, and a few generations before they were born. With this perspective in mind, perhaps we can understand why Chinese leaders also need to convince its own bureacrats (and academics) that China is now in the Core. And the new rules is peace and new objective is development, for everybody in the core of the world.

---About the embedded song:- for the original Korean version here, download here)- for introduction to the movie FLower Girl (1972) see here and here.The Flower Girl, with its beautiful lyric, became extremely popular in China and was adapted into a Chinese version. That is also some historical persepctive.

2006-05-27

Chen Shui Bian may have to go. This does not have anything to do with Chen Shui-bian's infamous son-in-law Chao. I believe that, given the benefit of doubt, as long as CSB is not aware of Chao's crime, he should not be held responsible for his son-in-law's corruption. We can blame him for incompetence, of not being able to curb the crimes. We cannot force him to resign. MYJ deserves special praise for correctly being sober about this issue. Although "the first time a member of the family of a [Taiwanese](ROC) president has been detained on suspicion of breaking the law." also signifies a milestone in democracy. This is democracy. Would you imagine Tze-ven Soong, who had embezzled from the state an amount comparable to a year of China's GDP be in jail?

This is about CSB's wife and the Sogo gift certificate scandal. Now there is concrete evidence that the certificates the 'first lady' used matches the serial numbers of the missing certificates that were involved in alleged corruption.

DPP should dump CSB if he refuses to honor his promise. This is not about Blue vs Green. This is also not about your worry or discrimination against Annette Lu. This is about the ideals that DPP claim to (and used to) represent, a clean government.

This does not mean defeat in Taiwan's democracy reform. Instead, this is another milestone for the achievement of democracy (and media freedom) by the people in Taiwan, in the same way that Watergate is a triumph of democracy for the US. For the first time in history, a leader has to step down due to popular pressure in a Chinese government.

p.s.1) For those who think I am blue-baised. I wholeheartedly wished CSB win when he ran for Taipei Mayor in 1995, and half-hearted in 2000 when he ran for the president. I am also skeptical of the bullet-gate accusation in 2004.2) I still do not believe CSB himself is involved in all these scandals in person. Just put myself in his shoes, even if I discount my IQ to his level, no one will be that stupid. But now doubt is cast.3) The reason I believe Ah Bian needs to step down is solely based on his public support and promise regarding the Sogo Certificate. Had he tackled the crisis the same what he did toward Chao. He does not have to step down.4) Regardless of the accuracy of this AD report, shall we expect Apple Daily bashing from the indiscriminate green this time like they did to TVBS last year?

2006-05-26

Joseph Wang believes there may be tremendous lack of imagination for us to not visualizing the scenario of gap consuming the core in the Barnett theory. The wisdom of asking this question is not about preparing us for the worst case scenario, but about how we anticipate the challenges and discover a pragmatic solution to prevent it from happening. He started with this

"The one thing that bin-Laden understands that unfortunately most people don't is the central nature of the economic front on the war on terror. Put simply, if we get to 2100, and most of the world is living in decent middle class conditions, then bin-Laden will lose. If we get to 2100, and most of the world isn't living in decent middle class condition, then bin-Laden or someone like him will win. This will be the case no matter what actions are taken in the short term."

Will Texas degenerate into Lagos one day, as depicted in science fiction? Is this so hard to imagine?

Read history books on the fall of Roman Empire and the Han Empire circa 150-350AD

Rent an old James Bond movie, compare Rio de Janeiro today with Rio in 1960s

More recently, the collapse of SE Asian economy is 1997/98 if these countries were left alone to fall (i.e. if it is the OECD countries like in 1929)

In other words, in analogy to the language of physics, it is much cheaper to increase the entropy of a system than to decrease it. In layman's terms, it is much easier to shuffle a deck of card than to arrange them 1 to 52. It is much cheaper to pollute than to clean, to waste than to recycle, to fall the WTC than to build it.

It follows that if we are following the same approach of the disruptors (terrorists), we may not win even if we have a much larger set of resources to command and brains to use. This is an assymetric war. Therefore, one needs to step back and think in bigger pictures, and approach the problem from a different dimension. I am therefore also pretty pessimistic about Dubya's tic-for-tac ans passive tactics interwined with multiple distraction driven by various selfish interest groups.

Barnett's approach offers us one grand framework using the concept of core and gap. It is not the only framework. But great minds think alike, there must be anaology or correspondence if there is another sensible framework. In mathematics, if you can solve a problem in two different ways, it is very likely that you could find a "mapping" of the logically steps of these two solutions. Unfortunately, real world problem involves much more variables than problems in physics and mathematics.

We are not certain that Barnett's approach will solve the problem once and for all. But one thing certain is that it is a better approach than the non-solution US adopted today. But one principle will be common in any solution we find in the future, in Joseph's words

"Remove the economic stresses and the petri dish disappears, and the agents of Satan are revealed for who they are."

It requires political and economic measures, military measure at best should be supplementary.

Trade balance has been a hot topic in the US, especially among the protectionists. Some blamed the RMB currency peg, others blame WTO and call for tariff. In one extreme we have the now obsolete Schumer-Graham Act, asking for a 27.5% tariff to 'equate' the effect of an allegedly mis-pegged Yuan.

The interventionists believe they are the gods, who are more powerful than the market. Perhaps they want to make themselves more powerful than the market, like Stalin and Mao once were able to do so. What they have missed is that every merchandise has its own cost structure and every factory in each country has its own competitive advantage. Imposing indiscriminate tariff or 'manipulating' currency does disservice to the consumers and discourages efficiency in the suppliers.

With fair and transparent macro-environment, each product will find its own price based on supply and demand, just like raindrops find their way to the puddles on the ground. To tilt the ground is a task not only difficult, but also impossible to accomplish.

Here is a good example of how the price of chopsticks (waribashi) find its own 'equilibrium point'.

"In a move that has cheered environmentalists but worried restaurant owners, China has slapped a 5 percent tax on the chopsticks over concerns of deforestation. (The tax could be think of a better reflection in of the cost, i.e. environmental cost, see elaboration in the comments)

Chinese chopstick exporters have responded to the tax increase and a rise in other costs by slapping a 30 percent hike on chopstick prices with a planned additional 20 percent increase pending.

A pair of waribashi that used to cost a little over 1 yen less than 1 cent now goes for 1.5 to 1.7 yen. The rising costs of raw wood and transportation because of higher oil prices have also contributed to the rise, industry officials said.

To minimize the impact, Japanese importers now buy more bamboo chopsticks and are considering new suppliers, including Vietnam, Indonesia and Russia, said Fukuoka.

An Osaka-based restaurant chain operator, Marche Corp., switched to reusable plastic chopsticks in February at its 760 outlets after testing various materials over six months, said company spokesman Michihiro Ajioka.

A pair of plastic chopsticks costs about $1.17 and can be reused some 130 times a cost-per-use that matches a pair of waribashi, Ajioka said.

This is a lesson for both the trade bureaucrats and the environmentalists. It shows how one can achieve the objectives without getting all the bureacratic inefficiency, while benefiting human beings overall in the long run.

Prices will adjust by themselves, as no factory can sell at a lost in the long run. What you need to do is to deal with the price levers, instead of relying on the lazy solution of tariff or currency. If Senator Schumer is a little less lazy, he could try not to manipulate currency in his own way. Instead, he could work on much more effective measures to achieve his objectives, such as pulling the environmental or labor policy lever in the factories. He will win support from everybody, including workers and people inside China.

2006-05-25

Why chose these 7 weeks (from Apr 6 to May 23)? I started google analytics in the second week of April.---

Country

% visit

% pageview

US

40.1%

38.8%

Hong Kong

10.1%

9.9%

UKm

6.1%

5.7%

Canada

6.0%

8.8%

Australia

5.3%

4.6%

Singapore

5.2%

4.6%

Japan

3.7%

3.6%

Taiwan

3.7%

4.2%

Malaysia

1.8%

1.5%

Germany

1.7%

2.9%

Netherlands

1.3%

1.2%

India

1.3%

1.0%

Korea

1.2%

1.5%

New Zealand

1.1%

0.8%

France

1.0%

1.1%

Sweden

0.7%

0.6%

Italy

0.7%

0.5%

China

0.6%

0.4%

---China ranked low because of the Great Fire Wall (Also because I chose to write this in English. I write better in Chinese but it is just too hard to type Chinese in an English Window PC). I suppose quite some of the US originated traffic may represent proxy view from China. (Some in China may be viewing my mirror site but I suspect the popularity of it)

An estimate of mainland China visitors can be done by comparing language system of the operating system. Because virtually only users inside China use simplified Chinese OS.

Simplified Chinese/Traditional Chinese(HK&TW)=64%. so Mainland originated visits is around (10.1+3.7)x64%=8.8%. This will be the lower bound as quite some visitors (esp ex-pats) use English OS in China

If I use Japan as a reference, simplified Chinese/Japanese=164%. So lower bound of mainland visits is 1.64x3.7%=6.1%. Using Korea as reference on gets 7.0%. I guess this gives us some flavor of China originated traffic.

Returning visitors = 23.33% (anyoneone who have visited at least twice since Apr 6 is defined as a returning visitors)

Total number of countries/domains: 90 (see the list below for how this is defined. e.g., Guam, Macau, Taiwan, "satellite ISP", "not set")

Other countries in order:

Thailand

Philippines

Brazil

Belgium

Switzerland

Spain

Russian Federation

Macau

Austria

Turkey

Indonesia

Denmark

Ukraine

Egypt

United Arab Emirates

Poland

South Africa

Chile

Israel

Greece

Satellite Provider !

Portugal

Norway

Mexico

Finland

Romania

(not set) - yes this is how it is defined

Saudi Arabia

Ireland

Mongolia

Czech Republic

Hungary

Peru

Estonia

Countries with 3 visits:

Ghana

Iran

Solomon Is

Argentina

Venezuela

Countries with 2 visits:

Jordan

Malta

Bangladesh

Lebanon

Qatar

Vietnam

Latvia

Croatia

Slovakia

Yugoslavia

Countries with 1 visit:

Guam

Afghanistan

Ethiopia

Macedonia

Puerto Rico

Sri Lanka

Myanmar

Oman

Syrian Arabia Republic

Uruguay

Kenya

Europe

Cayman Islands

Liechtenstein

Trinidad and Tobago

Colombia

Tunisia

Sudan

Nigeria

Iceland

Brunei Darussalam

Lithuania

Morocco

Finally the map overlay of the last 500 visits (google does not show more than 500) is here

The export of fake goods out of China is commonplace whether you are talking about designer bags, blockbuster movie DVDs, or “Mont Blanc” pens. Many European and U.S. holidaymakers take these knock-offs home with them — some of them knowing they’re counterfeit; others are unaware. Underground Chinese firms spirit such goods out of the mainland on a much larger scale.

Now we may we have identified another fake: the supposedly gargantuan global trade surplus China enjoys with the rest of the world. Much of China’s trade surplus in 2005 was not trade at all, we think, but rather capital inflows (perhaps as much as $67 billion) disguised as trade. If so, this has major implications for China’s trade policies, the yuan, and the way the U.S. deals with China.

Stephen Green also talk about other factors such as transfer price (booking more profit in lower tax jurisdiction such as HK) which distorted the trade figures. One major area he did not discuss is the tax incentive China has given to FDI manufacturing facilities. i.e these factories will typically receive 2 years of tax-exemption and another 3 years of half tax (i.e. 16.5%), counting from the first year of cumulative breakeven. So for factories in Year 1 and 2 it makes more sense to book the profit in China than in HK. In year 3-5 there is no real difference. Now that RMB is expected to appreciate, even MNC are trying to book the profit inside China and keep them as RMB in year 1-5 ! And a lot of the factories are in year -2 to 5.

Do read the Businessweek article (may require free registration), Stephen Green actually did the maths and quantified his reasoning. Green, Jen, Roach, why all these good economists tend to call themselves Stephen?

There are actually more explanation, even to the pre-2000 numbers. Remember the VAT rebate for export? In China, the factory receives a rebate of the 17% VAT (i.e. the value added portion, = revenue - raw material cost) if the goods is exported, but not so if sold domestically. The factory owners would then ‘export’ the goods and smuggle them back for domestic consumption.

This policy is being phased out now, but it serves as one example for how one should look at China's trade numbers (or any number). It is not that the statistics are rigged, rather the businessmen are cunningly greedy and officials corruptedly co-operative. Here is how it works,

A factory (buyer) needs a container of copper wire (or cotton thread). It intends to purchase it from a domestic factory (supplier).

The two factories then make an arrangement that the copper is to be exported to HK. (Yes, HKSAR of PRC is considered a "foreign" destination under WTO or PRC custom)

Upon arrival at the port (e.g. Shantou, Shenzhen, Xiamen, etc). The export certificate is issued. The supplier gets the 17% rebate using the certificate, and then rebate the discount to the buyer.

How does the buyer get the goods?

case 1: the container never really leaves the port, instead, it was leaves the fence and was sent directly to the buyer. The customer officers was bribed.

case 2: the ship make a detour back to the port (or another port), the 20 ton container was over-filled to 30 tons (30 full tons in the export certificate for rebate), but the custom officer only record 10 ton when it is imported. Saving in tax? as much as 17% -(1/3) x import tariff, which is often less than 10% for these goods (though theoretically there is saving as long as tariff is small than 50% if Value-added = full value in the case of commodity) for this scheme to work.

Result, China records a trade surplus to HK. US thought it had a trade deficit. But who the hell in US would import copper wire from China?

2006-05-24

It has been 60 years since WWII ended in Asia. Not many people in China, especially the younger generation, remember or care about the old wound, if not for continuous provocation from the right wing in Japan. In fact, Japanese products, both merchandise and cultural (sushi, TV drama), have gain wide acceptance in China before 2003. It could have been a great era between the two great people in East Asia, if not for the hostilemaneuvers.

JAL, ANA refuse to carry the soldiers, because many Japanese (and those in the airline trade unions) do not support the invasion of Iraq or Japan's involvement. (Many Japanese people are peace loving, or do not want to get themselves into any trouble)

In addition JAL, ANA do not want to become target of terrorist retaliation. It is very likely that Cathay decided to forgo this business for that particular reason (or "pressured" by insurance company?)

In the previous 9 envoys, the JSDF have used government flights (the "Airforce One" equivalent) or civil airlines in Japan, because JSDF's own plane does not have the range of the 747. It is a mystery why they chose Cathay this time, another mystery why the US does not offer help in this case.

It was reported that Cathay's explanation is that it was declined passage into the airspace of a few countries. The use of airspace by civil airlines has very specific restrictions, e.g. armed personnel, custom officers are not included in the air freedom negotiation. Therefore, Cathay needs special application for such chartered flights.

In fact, the final solution on Qatar Airline is also cheating on the Airline, and the countries where that the plane passes their airspace. Because an army carrying guns on plane has used the airspace, violating the agreement Qatar Airline signed with the respective countries

The event could have a very easy solution. Charter an American airline, or get help from US navy. There is no need spray salt on the wounds of the Sino-Japanese relationship. Can't we just get along and make money, or love?

Above is the map for the ADIZ, looks quite normal, isn't it? The deep blue area is Japanese Airspace, which is 12 nautical miles from its shoreline. The light blue area is the "Air Defence Identification Zone", it is defined by Japan's SDF alone. There is no international law governing such definition. After all, anyone has the right to define how oneself should be "alerted".

e.g. US has the total right to alert itself into Red sign if bin Laden flips his body in a cave in Afghanistan. This is strictly the internal affair of the US.

But there is something unusual. Japan re-defined and expanded its "ID Zone" just a few years ago. The map does not exactly overlap its claimed EEZ

This is the overlay of EEZ claimed by Japan (disputed by China) and Japan's Air-defence ID Zone. The dotted lines represents the EEZ claimed by Japan (for a full map see here). The Red line is the ID Zone.

The line starts from from Japan/Korea boundary (the line on the map above should start right south of Teuju Island) along 125E longitude to 30N latitude

Then it turns SW toward 25N120E, until it reaches 122.4E, the line turns south again from there

The ID Zone encloses a large portion of China's undisputed EEZ, to as far as 130km (not nautical mile) from China's coastline.

Now one cannot help but ask the question, why does the ID Zone extend over to the China EEZ (the portion undisputed by Japan). Sure Japan has the right to alert its own fighters in any way they want, they are free to do so even if a China plane takes off at Urumqi. But misleading the press that this is an invasion of Japanese Air Space? Why? They think we are all idiots?

2006-05-03

Oops. It is Asuncion, not Montevideo. I got the wrong "turtle" ("Guay"). Thanks to Roland's for his correction in the comment below.

I keep the same old WRONG title, because,1) Blogger will change the permalink/etc if I change the title. This is a punishment for my careless mistake, a major mistake for someone who claim to be a map lover, so everyone knows that i made such a silly mistake.2) I am no less guilty than CSB and Taiwan media, as Lin Cho-Shui correctly pointed out (do a search on 過境 on yahoo news Taiwan, less than 10% mention the name of destinaion country. most just said "2 conutries in C&S America". I know that should not be my excuse), in neglecting CSB's designated mission in this trip.

(As David noted in the comment below, ASU is 78 miles from the anti-pole of TPE, which makes the additional mileage in detours less dramatic than that of MVD. You can replace ASU with MVD in the "paths box" of the great circle links, you will see the difference in mileages are much bigger.)

---(Warning: this is really a map/geography post, not a political post. The author takes Ah Bian "Astray Diplomacy 迷航外交" as an excuse to blog on geography.)

The shortest route from Taipei to Montevido(Uraguay) Asuncion Paraguay is to fly over South Africa (12367 miles). However, the longest a commerical flight (Boeing 747) can fly is around 8000 miles (e.g. the direct (polar) flights from HKG to JFK(NYC) on Cathay Pacific, 8072 miles).

Therefore, a fueling station is needed. CSB wanted to refuel at NYC, SFO or LAX. But these paths do not make much sense, said DPP legislator Lin Cho-Shui. Lin contends that the purpose of the trip is to visit Montevideo, not big cities in USA.

"the government has made transit the core axis of diplomacy, and flatters itself when it receives every insignificant gesture [from USA]. This is totally ridiculous. Do not waste resources on meaningless transit diplomacy....even if Taiwan received elevated treatment every time for 100 times, there is no impact on the normalization of Taiwan-US relationship."

Chiang III said JNB (South Africa) is a better refuel station. I usually do not believe in politicians, esp someone from the Chiang family. So I did some research on the economics of the paths. Here is what I got

TPE-JNB-ASU: 12368 (miles)

TPE-JFK-ASU: 12459

TPE-ANC-ASU: 12485

TPE-SFO-ASU: 12502

TPE-LAX-ASU: 12503

So Lin is correct. JFK is not the best path, nor is SFO/LAX. Chiang III is actually totally right (my apologies). JNB is the best alternative, only 1 mile off the ideal path.

New update (May 4):Ooops it is Abu Dhabi! Lebanon rejected the request.A small problem: TPE-AUH-ASU=4139+8234=12373 miles, although an overall shorter distance, it is not a mid-point refuel. i.e. the second segment AUH-ASU is 8234 miles, 747 can handle this with no problem, but for safety, it might need a "forced" re-fuel if encounters headwind. Let's pray for the wind.

New update (May 5):According to the "Foreign Minister" Huang, the Aquafresh plane will have to refuel at Dominican Republic again. Pretty big detour this time.New mileage: TPE-AUH-SDQ-ASU=4139+7671+3111=14911, what a mileage run! Is CSB trying to earn more miles for his children? Given the recent controversial of family member tag-along to AUH.(update):Of course, there is a latest twist. Because the ground temperature in AUH is too high, 47 degrees Celsius. The plane could not refuel fully (avoid high pressure in gas tank). The plane could not even reach Santo Domingo, it stopped at Amsterdam. TPE-AUH-AMS-ASU=13891.

Refueling stop for the return trip is another game to play. "Guerilla diplomacy", some say. Perhaps not Anchorage.